EUR to CHF Exchange Rate Slides as SNB Hikes Rates
The EUR to CHF exchange rate plummeted to the lowest level since April this year after the Swiss National Bank (SNB) caught the market off-guard. The EUR/CHF pair is now trading at 1.0170, which is about 3.30% below the highest level this week.
The EUR to CHF pair crashed following the latest interest rate decision by the Swiss National Bank. After concluding its two-day meeting, the bank did the unthinkable by hiking interest rates by 0.50%. This was the first time that the central bank has hiked interest rates in over 15 years.
The SNB decided to hike rates simply because of the state of the Swiss economy. The country’s unemployment rate has plummeted to a record low while inflation has started rising. Recent data showed that the country’s headline inflation surged to over 2.9%. In a statement, the bank said that it could continue hiking interest rates in a bid to slash prices. It also warned about the impact of these hikes, saying:
“The forecast for Switzerland, as for the global economy, is subject to large risks. If the energy supply in Europe were to be adversely affected, this could have a serious impact on the Swiss economy.”
Central banks tend to hike interest rates when inflation rises. The goal is to slow spending and force businesses lower prices.
However, the challenge is that the current inflation is being caused by supply challenges. Sanctions on Russia have helped push higher prices by reducing supplies.
The EUR to CHF fell sharply because the SNB hiked rates faster than the European Central Bank (ECB). In its statement last week, the bank decided to leave interest rates unchanged and signaled that it will move by just 0.25% in the coming month.
Other central banks have also hiked interest rates. The Federal Reserve hiked by 0.75%, the highest increase since 1994. Similarly, the Bank of England hiked by 0.25%.